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Awesa v Southern Highlands Provincial Government [2015] PGSC 63; SC1464 (3 July 2015)

SC1464

PAPUA NEW GUINEA
[IN THE SUPREME COURT OF JUSTICE]

SCA No. 28 OF 2013

BETWEEN:

ALEX AWESA
Appellant

AND:

SOUTHERN HIGHLANDS PROVINCIAL GOVERNMENT
Respondent

Waigani : Gavara-Nanu J, Manuhu and Poole JJ.
2013: 18 December
2015: 03 July

CONTRACT LAW- Contract of sale – Vendor and purchaser – Contract duly executed – Purchaser in breach - Vendor giving notice to terminate contract – Vendor terminating contract.

CONTRACT LAW – Vendor claiming damages for breach of contract – Defence struck out – Default judgment entered – Assessment of damages – Purchaser raising a fresh matter in defence.

CONTRACT LAW – Damages – Vendor only entitled to damages equal to amount of 10% deposit under the contract.

Case Cited:
Papua New Guinea Cases

Coecon Ltd v. National Fisheries Authority (2002) N2182
Kawaso Ltd v. Oil Search PNG Ltd SC1218
PNGBC v. Jeff Tole (2002) SC694
Ramu Nico Management (MCC) Ltd v. Eddie Tassie (2010) SC1075
The Government of Papua New Guinea and Richard Harold Denis v. Stanley Baker [1977] PNGLR 386
William Mel v. Coleman Pakalia and The State (2005) SC790

Overseas Cases Cited

House v. King (1936) 56 CLR 499

Counsel:

J. Nandape, for the Appellant
J. Kiwai, for the Respondent

3rd July, 2015

1. By The Court: The appellant appeals the whole of the judgment of the National Court given on 11 March, 2013, at Waigani.

2. The background facts from which this appeal arises are as follows. On 29 December, 2009, the appellant and the respondent entered into a contract of sale. Under the terms of the contract, the parties agreed that the respondent would buy a property belonging to the appellant described as Section 23 Allotment 4, Mendi, Southern Highlands Province, for K850, 000.00.

3. On 01 February, 2010, the appellant terminated the contract, this was six months after the parties had executed the contract. The termination followed the failure by the respondent to pay the 10% deposit, the stamp duty and the Ministerial approval fee. The contract provided for these to be paid at the time of the execution of the contract.

4. On 19 May, 2010, the appellant issued a writ claiming damages against the respondent for breach of contract. On 05 August, 2010, the respondent filed its defence.

5. On 19 October, 2010, the respondent's defence was struck out and judgment was entered for the appellant with damages to be assessed. On 13 August, 2012, the trial on assessment of damages was conducted on affidavits only. On 11March, 2013, the primary judge delivered the decision dismissing the plaintiff's claims with costs.

6. The grounds of appeal are as follows:

3. GROUNDS

A. The Learned Trial Judge erred in both law and fact in placing so much weight on the letter dated 16 February, 2010, by Jerry Kiwai Lawyers to Nanadape and Associates Lawyers ("the letter") to dismiss the Appellants' claim for damages in that;

i) what the letter says is that the Respondent was not in breach of the contract as it was willing at all material times to perform its part of the contract and it was the Appellant who breached the contract by refusing to accept the payment, and this alone goes to the issue of liability which was already determined by the Court on 19 October, 2010 by entry of judgment against the Respondent with damages to be assessed.

ii) the judgment on liability granted by the National Court on 19 October, 2010, confirmed that the Respondent was in breach of the contract and therefore, it was not open for the Learned Trial Judge to re-visit the issue of liability at the trial for assessment of damages.

B. The Learned Trial Judge erred in fact in;

(i) relying heavily on the letter and making a finding of fact that the Respondent offered settlement in the sum of K850,000.00 to the Respondent sometimes in 2008 when there was no other evidence to support this finding of fact;

(ii) making a finding of fact based on the letter that the amount offered by the Respondent was the full agreed contract price or consideration;

(iii) making a finding of fact based on the letter that the Appellant rejected the alleged settlement offer made by the Respondent when there was no other evidence whatsoever to support this finding of fact;

(iv) making a finding of fact that the lack of details as to dates, times and names of person with whom the Appellant followed up lends support to the allegations in the letter when;

a) the Appellant in his affidavit sworn on 02 September, 2010 and filed on 08 September, 2010 says in paragraph 8 that soon after signing the contract he made phone calls and had personal meetings with the Provincial Administrator of the Respondent and Mr Jerry Kiwai, the Respondent's lawyer following up on the settlement of the contract.

b) the Appellant had annexed to his affidavit as evidence a letter dated 27 May, 2009 to the Provincial Administrator of the Respondent following up on the settlement of the contract.

(v) making a finding of fact that any damages suffered by the Appellant was of his own doing when the undisputed evidence before the Court was otherwise.

(vi) relying solely on the letter to arrive at this finding of fact referred to above;

a) when there was no other independent evidence whatsoever to support these findings.

b) when the Respondent in its defence filed on 05 August, 2010 had not even raised the allegations contained in the letter as part of its defence.

(vii) making a finding of fact that the Respondent or his lawyer did not take issue with the letter after it's receipt when;

(a) the evidence showed that the Appellant had given his notice of intention to sue the State & the Respondent in July 2009 and that the letter was written about six (6) months after the notice of intention to sue had been given; and

(b) the fact that the Appellant issued the Writ of Summons for breach of contract on 19 May, 2010, about two and a half months after the letter; was sufficient to show that the Appellant took issue with the contents of the letter.

C. The Learned Trial Judge erred in fact in finding that there was no evidence of the kinds of opportunities the Appellant had in renting his property (sic.) when the Appellant had provided sufficient evidence in his affidavit of the loss of opportunity to earn rental income.

4. ORDERS SOUGHT

A) That the decision of the National Court dated 11 March, 2013 be quashed.

B) That judgment be entered for the Appellant in the following terms;

(i) K85, 000.00 being the ten percent deposit;

(ii) K26, 000.00 being for loss of rental income.

(iii) Interest at 15% per annum pursuant to clause 15(e) of the Contract for Sale.

(iv) Cost of both the National and Supreme Court proceedings.

(v) Any other or further orders as this Honourable Court deems fit (sic.).

7. In our view, this appeal turns on a letter written by Mr. Jerry Kiwai, who was the lawyer acting for the respondent, to Nandape and Associate Lawyers. The decision by the primary judge to dismiss the appellant's claim for damages was based on this particular letter, which was dated 16 February, 2010. The letter is reproduced below in full:

16th February, 2010.

Nandape & Associates Lawyers

Lot 9 Sect 93, Pruth Street

Two Mile Hill

P.O Box 7059

BOROKO

National Capital District

Attention: Ms. Judy Nandape

Dear Madam,

RE: ALEX AWESA –ats- SOUTHERN HIGHLANDS PROVINCIAL GOVERNMENT_-TERMINATION OF CONTRACT OF SALE OF LOT 3 SECT 23, MENDI, SHP.

We refer to the above and your letter dated 2nd February, 2010.

We are instructed that your client refused to accept a sum of K850, 000.00 being the contractual amount agreed between the Southern Highlands Provincial Government ("SHPG") as per the Contract of Sale. The amount was offered by our client around December, 2008.

Our client was at all material times willing to pay the contractual amount as per the contract but your client refused. Therefore there is no breach on the part of our client as alleged in your letter.

Accordingly, our client is not liable for any damages purportedly suffered by your client.

For your information and consideration.

Yours Faithfully,

Jerry Kiwai Lawyers

(Signed)

Per. Jeff Lome

8. It is trite law that an appellate court cannot overturn a decision of a primary judge unless an identifiable error is shown by the appellant in the decision. Such an error may be borne out by the primary judge applying or acting on wrong principles, was influenced by irrelevant and extraneous matters, took into account matters which should not have been taken into account or mistook facts: Kawaso Ltd v. Oil Search PNG Ltd SC1218; Ramu Nico Management (MCC) Ltd v. Eddie Tassie (2010) SC1075 and The Government of Papua New Guinea and Richard Harold Davis v. Stanley Baker [1977] PNGLR 386. In House v. King (1936) 56 CLR 499, at 504 to 505, Dixon, Evatt and McTiernan JJ, stated this principle broadly in this way:

"The manner in which an appeal against an exercise of discretion should be determined is governed by established principles. It is not enough that the judges composing the appellate court consider that, if they had been in the position of the primary judge, they would have taken a different course. It must appear that some error has been made in exercising the discretion. If the judge acts upon a wrong principle, if he allows extraneous or irrelevant matters to guide or affect him, if he mistakes the facts, if he does not take into account some material consideration, then his determination should be reviewed and the appellate court may exercise its own discretion in substitution for his if it has the materials for doing so. It may not appear how the primary judge has reached the result embodied in his order, but, if upon the facts it is unreasonable or plainly unjust, the appellate court may infer that in some way there has been a failure properly to exercise the discretion which the law reposes in the court of first instance. In such a case, although the nature of the error may not be discoverable, the exercise of the discretion is reviewed on the ground that a substantial wrong has in fact occurred."(our underlining).

9. In his judgment, the primary judge summarized the relevant principles that should guide a trial court in assessing damages for a plaintiff. His Honour listed five principles. First, a default judgment resolves the question of liability in respect of the matters properly pleaded in a Statement of Claim. Second, it is open for a defendant to take issue on any fresh matter that has not been pleaded in the Statement of Claim. Third, in a case of a claim for damages for breach of a contract, the default judgment should confirm the breach and the damages assessed should flow from such breach. Fourth, a plaintiff has the onus to prove the damages claimed with credible evidence and if the Court is satisfied on the balance of probabilities that damages have occurred, then appropriate awards should be made for the proven damages. Fifth, in regard to the fourth principle, the plaintiff is only entitled to lead evidence and recover damages in respect of the matters that are properly pleaded in the Statement of Claim.

10. For these principles, the primary judge relied on Coecon Ltd v. National Fisheries Authority (2002) N2182; PNGBC v. Jeff Tole (2002) SC694 and William Mel v. Coleman Pakalia and The State (2005) SC790.

11. After considering the above principles, the learned primary judge concluded that the third principle applied to the case before him. His Honour said:

"...That means, the default judgment establishes Alex's claim as pleaded in his Statement of Claim and in particular that the Provincial Government breached the contract and that Alex has suffered damages. But exactly what damages did he suffer and what is the reasonable amount in compensation is what is left for me to determine." (our underlining).

12. His Honour went on to discuss the actions taken by the appellant to compel the respondent to perform its obligations under the contract, which included paying the agreed purchase price of K850,000.00 to him. His Honour also noted the letters of demand sent by Ms. Nandape of counsel for the appellant to the respondent. One of those letters is dated 2nd July, 2010, where Ms. Nandape reminded the respondent that it was in breach of the contract and gave the respondent 7 days from the date of the letter, to perform its obligations under the contract. The next letter his Honour noted is another letter of demand by Ms Nandape to the respondent dated 27 July, 2009. In that letter, Ms. Nandape informed the respondent that the appellant intended to institute proceedings against it. On that same day, the appellant gave a s. 5 notice to the State under the Claims By and Against the State Act, 1996, informing the State of his intention make a claim against the respondent for damages for breach of contract. His Honour also noted that on 1 February, 2010, the appellant informed the respondent that he was terminating the contract. Subsequently on 19 May, 2010, the appellant filed proceeding W.S No. 584 of 2010.

13. After discussing the actions taken by the appellant, the learned primary judge said, if that was all that was before him he would have had no hesitation in finding for the appellant in the sum of K85, 000.00, which was the amount required for the 10% deposit under the contract, which the appellant would have been entitled to forfeit and keep under the terms of the contract. His Honour however said, he would have had difficulties awarding the claims for loss of rentals, legal, phone and fuel costs because there was no supporting evidence.

14. Then at pages 12 to 15 of his judgment, which appear at page 93 of the Appeal Book, his Honour said:

"There is unfortunately a more serious problem that affects the whole of Alex's claim. The problem is this, also annexed to Ms Nandape's affidavit of 06 August, 2012, is a letter dated 16 February 2010, from Jerry Kiwai Lawyers, which refers to a letter dated 2 February, 2010, form (sic.) Nandape Lawyers, a copy of which is not in evidence. A copy of the Letter from Jerry Kiwai Lawyers is annexure "G" which states in relevant parts:

"We are instructed that your client refused to accept a sum of K850, 000.00 being the contractual amount agreed between the Southern Highlands Provincial Government ... as per the Contract of Sale. The amount was offered by our client around December, 2008.

Our client was at all material times willing to pay the contractual amount as per the contract but your client refused. Therefore there is no breach on the part of our client as alleged in your letter.

Accordingly, our client is not liable for any damages purportedly suffered by your client."

That letter was not marked "without prejudice." That means, the letter was open for admission into evidence by either of the parties in the event the matter went to Court. Hence, the letter was intended to be used by either of the parties if the matters in issue between them did not resolve out of Court.

A reading of the above letter reveals clearly a number of things. First, the Provincial Government offered settlement in the sum of K850, 000.00. Secondly, the amount offered was the full agreed contract price or consideration for the contract of sale and was beyond the amounts claimed in this proceeding. Thirdly, the settlement offer was made sometime in December, 2008. Finally Alex rejected the offer.

If what was stated in that letter was not true, it was incumbent on Alex and his lawyer to take issue with it immediately or soon upon its receipt. There is no evidence of that being done. The lack of any details as to dates, times and names of persons with whom, Alex followed up on the settlement of the contract, lends support to what is stated in the letter dated 2 February, 2010, from the Provincial Governments Lawyers. Additionally, there is no submission on how this letter should be treated. It is part of Alex's case. It is part of his evidence, which the Court must consider. Having adduced it, it was incumbent on Alex and his lawyer to demonstrate why or how that letter should or can be ignored. That they failed to do.

Having regard to all of the above and more so the letter date (sic.) 16 February, 2010, from the Provincial Governments (sic.) Lawyers, I find that if indeed, Alex suffered the damages he claims he suffered, that was his own doing. The Provincial Government offered settlement in the same month and year of the signing of the contract of sale at a level of damages that was much higher than what he is claiming. That offer was made before any damages could be said to have run. Alex however rejected that settlement proposal. Hence, I find that Alex did not suffer any damages but if he did suffer any damages as he claims, that was his own doing in respect of which the Provincial Government cannot be responsible. Accordingly, I decline to make any award in damages for Alex, the plaintiff. Consequently I order a dismissal of the claim for damages and order judgment for the defendant Provincial Government. Costs shall follow the event."

15. Having considered the submissions by counsel and the judgment of the learned trial judge, we are of the respectful opinion that the learned primary judge fell into error by relying on the letter written by Jerry Kiwai Lawyers to Nandape and Associates Lawyers dated 16 February, 2010, and allowing himself to be influenced by it. In the first place, the letter appears to be hearsay. But more significantly, the letter is silent regarding the date and the month the respondent made the offer to purchase the property at the agreed price. The letter also does not indicate who made the offer and how the offer was made. The letter therefore in our view is not a credible material or evidence upon which his Honour could rely on. Second, his Honour had already found in his ruling that the respondent was in breach of the contract. In our respectful view, once that finding was made, the respondent was liable for damages claimed by the appellant. Therefore, it was wrong for the learned trial judge to consider the issue of liability again based on the letter by Kiwai Lawyers. At the trial, the respondent relied on the letter to argue that it (respondent) was not liable to any damages suffered by the appellant claiming that it was the appellant who refused to honour his part of the contract. This argument is in our view futile because as we said, by finding that the respondent had breached the contract, the learned primary judge had in essence found that the respondent was liable to the appellant for damages. Furthermore, there was no evidence before his Honour that the appellant refused the offer. Third, the letter by Jerry Kiwai Lawyers could only be relied on by his Honour if it had been pleaded in the defence, in this case there was no defence because it had been struck out. Fourth, the letter was still of no assistance to the respondent because pursuant to clause 4.1, 4.2 and 4. 3 of the contract, the breach occurred well before the letter was sent to Nandape and Associates Lawyers, when the respondent failed to pay the 10% deposit, the stamp duty and the Ministerial Approval fee at the time of the execution of the contract.

16. For the foregoing reasons, we find that the learned primary judge erred in taking into account the letter by Jerry Kiwai Lawyers, and relying on it to dismiss the appellant's claim for damages. The learned primary judge allowed himself to be influenced by the letter in his decision. The letter was in our view irrelevant and should not have been considered at all. His Honour also over emphasized the letter. These are fundamental errors and are fatal.

17. In regard to the damages claimed by the appellant, the respondent was obligated to pay the deposit of K85, 000.00, which under the terms of the contract was subject to forfeiture, in the event that the respondent defaulted. In this case, there was a clear breach of contract, we therefore find that the appellant is entitled to K85, 0000.00, pursuant to clause 15 (a) of the contract. We award this amount to the appellant.

18. The appellant also claims K26, 000.000 in lost rental income. There is a lease agreement purportedly signed between the appellant and a Clough Curtain Joint Venture (CCJV) for the latter to rent the subject property from 26 September, 2009 to 29 March, 2010. The appellant's claim of K26, 000.00 is for this period, which is about six months, at the rate of K3, 000.00 per month. The contract of sale was signed on 29 December, 2008. It was terminated on 1 February, 2010. We have decided to refuse this claim for two reasons. First, the amount claimed appears to be excessive and cannot be justified. When period of six months is multiplied by K3, 000.00 per month, the amount comes to K18, 000.00. It is therefore plain that the claim for K26, 000.00 has no basis. The claim is in our view made in bad faith, because the lease agreement was executed while the contract of sale between the appellant and the respondent was still current.

19. We award interest at 15% as provided under clause 15 (e) of the contract.

20. We therefore make following orders:

(1) The appeal is allowed.

(2) The appellant is awarded K85, 000.00 in damages with interest at 15% as provided under clause 15 (e) of the contract of sale.

(3) The respondent will pay the appellant's costs of and incidental to this appeal and the National Court proceeding in WS 584 of 2010.

Orders accordingly.

___________________________________________________________
Nandape & Associates: Lawyers for the Appellants
Liria Lawyers: Lawyers for the Respondent